With Detroit’s bankruptcy filing dominating the evening news, city leaders in Stockton can finally breathe a sigh of relief as their city was no longer occupying national discussion as the largest to file Chapter 9 bankruptcy. The sigh of relief may be short-lived however, as State Controller John Chiang prepares to release the caustic results of an independent audit of the city’s finances.
A team of auditors was sent to the embattled Central Valley city to examine accounting practices for fiscal year 2010-2011. According to the Stockton Record—who obtained a confidential draft report—Chiang admonishes city leaders for failing to anticipate the impending bankruptcy when the writing was clearly on the wall.
A whopping 77% of all accounting controls were found to be faulty. Chiang’s final report offers eight conclusions and subsequent recommendations. Of particular note, the State’s team of auditors expressed serious concern with Stockton’s own internal auditor and his failure to carryout reviews of any substance. The city also neglected to administer adequate oversight over contracts or meet competitive bidding requirements. Chiang’s team also unveiled that Stockton owes money from its illegal transfer $1.4 million from redevelopment funds to help cover city debt.
All in all, the report suggests that Stockton’s fiscal irresponsibility can be attributed to three key aspects of their fiscal policy: 1) out-of-control retiree health benefits; 2) unsustainable labor contracts; 3) ill-advised issuance of bonds.
For more on the report, head over to the Stockton Record.